MI aluminium stocks analysis: Shanghai up trend accelerates

Stocks of primary aluminium registered with the Shanghai Futures Exchange (SHFE) rose by 10,365t to 51,407t in the week to Thursday in what marks an acceleration of the up trend. It was the sixth consecutive weekly rise in SHFE stocks and they are now showing a year-to-date increase of 32,825t but are still a long way short of the recent highs—in March just after the Lunar New Year holidays—of close to 100,000t. That said, the current trend is a pronounced one and interesting since the acceleration coincides not just with the summer holiday period but also the clamp-down on exports of “product” via changes to the tax code. LME stocks, meanwhile, continue to track broadly sideways with overall direction coming from activity at Singapore. Inflow here dropped a gear Thursday, which was the main factor in the net decline. It’s also worth noting that draw rates were boosted by the movement at Yokohama in Japan. The 625t registered tonnage here was put onto warrant at a time of market tightness in February—warranting activity in Japan is highly unusual and normally a sign of extreme tightness on the front part of the curve. It was all cancelled again on July 13 and yesterday’s action leaves just 125t to go. Cancellations were again low and the downtrend in cancelled tonnage was extended. The overall ratio of cancelled tonnage in the system is now at 2.6%.